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Weaker services drag on German private sector growth in April

Fri, Apr 22, 2016 - 3:49 PM

[BERLIN] Growth in Germany's private sector slowed to a 9-month low in April, a survey showed on Friday, as an upturn in the manufacturing industry was not enough to make up for a slowdown in services.

Markit's flash composite Purchasing Managers' Index (PMI) which tracks the manufacturing and services activity that accounts for more than two-thirds of the German economy, fell to 53.8 in April from 54.0 in March.

That was comfortably above the 50 line that separates growth from contraction, as it has been for 36 months.

Growth in manufacturing accelerated to a three-month high to reach 51.9 and manufacturers saw their output rise at the strongest rate since January.

"Expectations improved slightly but were down from earlier in the year, which is surprising given that one would hope that the ECB's stimulus measures would have an impact," said Markit economist Chris Williamson, referring to the European Central Bank's ultra-loose policy stance. "Maybe those measures have not yet filtered through or maybe they have been offset by other factors. There could be uncertainty about a Brexit creeping in or political uncertainty in the region as a whole," he added.

Services growth, however, was at its weakest in six months, with jobs being created in that sector at the slowest rate for a year.

Overall though, new business in Germany's private sector rose at a faster rate and job creation also accelerated, extending employment growth to 30 months.

In April, input prices fell for the forth successive month as a result of cheaper raw materials and favourable exchange rates.

"It seems as if deflationary pressures are beginning to bottom out, with input costs falling only marginally and output prices rising," said Markit economist Oliver Kolodseike. "This development should provide some modest cheer to eurozone policy makers after the currency union's official CPI measure showed that prices were unchanged," he added.